2019 (9) TMI 601 - AT - Income Tax

Tribunal upholds assessment reopening under Income Tax Act based on Investigation Wing findings. Disallows deduction under section 54.

The Tribunal upheld the legality of the assessment reopening under sections 147/148 of the Income Tax Act, 1961, based on information from the ... Reopening of assessment u/s 147 - information received from the Investigation Wing of the Revenue is on the basis of material seized during search proceedings u/s. 132 - statutory presumption u/s. 292C is as to the truth of its’ contents. - disallowance of the assessee’s claim u/s. 54 - HELD THAT:- the assessee can object to the reasons recorded after filing the return of income in response to the notice u/s. 148, and where so, the AO is bound to dispose the said objections per a speaking order prior to proceeding further in the matter. The assesseee in the present case has not raised any objection to the reason/s for issuing the notice u/s. 148 even till the date of the assessment. Deduction U/S 54 - in the original return assessee did not show the capital gain and claimed exemption u/s 54 - whether the property through which capital gain arisen, was belonging to the assessee or not - held that:- It has already been clarified that neither AD nor her husband, RL, was the owner of the subject property at any time, as well as the circumstances in which the name of RL came to be entered qua the said plot in the records of JDA. And, further, that her ownership in December, 2001, when RL was alive, only would validate the ATS dated 25/12/2001, on the basis of which the assessee makes a claim of transfer. Why, the house was admittedly constructed, and not purchased, by the assessee, disproving the said ATS, which is for the purchase of a built house property. The assessee’s case, i.e., on the merits of the denial of claim u/s. 54, whichever way one may look at it, is completely unproved; in fact, disproved. The assessee has abysmally failed to exhibit the satisfaction of the conditions for claim of s. 54. Nothing has been brought on record to rebut the clear findings by the Revenue authorities which, being consistent with the material on record, have been endorsed - no case for allowing a deduction u/s. 54, claimed at ₹ 27.10 lacs, in respect of purchase of a residential house in December, 2001 by the assessee, is made out. The assessee is apparently the owner of the subject property, having constructed it, but that by itself would not entitle him for a claim u/s. 54, the ingredients of which remain to be satisfied, and the case as made out, completely unproved, if not disproved. I, therefore, decline interference, and uphold the impugned disallowance - Assessee’s appeal is dismissed. Issues Involved:1. Legality of reopening of assessment under sections 147/148 of the Income Tax Act, 1961.2. Entitlement of the assessee to claim deduction under section 54 of the Income Tax Act, 1961.Detailed Analysis:1. Legality of Reopening of Assessment:The assessee contested the reopening of the assessment under sections 147/148, claiming it was based on 'borrowed satisfaction' without independent application of mind by the Assessing Officer (AO). The reasons for reopening included information from the Investigation Wing regarding undisclosed capital gains from the sale of property. The assessee argued this was not permissible under law, citing various judicial precedents.The Departmental Representative (DR) opposed the admission of additional grounds, suggesting they were an afterthought and unsupported by law. The DR cited several decisions to support this stance, emphasizing that the sufficiency of reasons or correctness of information could not be questioned at the stage of reopening.The Tribunal admitted the additional grounds, referencing NTPC Ltd. v. CIT, which allows raising legal pleas based on primary facts on record. On merits, the Tribunal found no fault with the reopening. The information from the Investigation Wing was based on material seized during search proceedings, carrying a statutory presumption of truth under section 292C. The AO's belief of income escapement was held to be honest and bona fide, satisfying the conditions for issuing a notice under section 148. The Tribunal upheld the reopening of the assessment, noting the assessee did not object to the reasons recorded until the assessment date.2. Entitlement to Deduction under Section 54:The assessee claimed a deduction under section 54 for the purchase of a residential house, supported by an Agreement to Sell (ATS) dated 25.12.2001. The AO disallowed the claim, citing discrepancies and lack of evidence. The AO's investigation revealed that the alleged seller, Smt. Amriti Devi (AD), denied owning or selling the property, claiming she was a tenant and not a state subject, thus unable to own property in Jammu & Kashmir. The AO also found the ATS to be unregistered and the witnesses untraceable.The CIT(A) upheld the AO's findings, noting the property was transferred to the assessee by the Jammu Development Authority (JDA) only on 03.01.2004, beyond the period specified under section 54. The CIT(A) also questioned the legal validity of the ATS, given AD's lack of state subject status and the requirement for JDA's approval for property transfer.The Tribunal reviewed the evidence and upheld the disallowance. It found the assessee's claim unsubstantiated, with the ATS dated 25.12.2001 being a forged document. The Tribunal noted the assessee's failure to produce any document of title or evidence of the property's purchase or construction. The Tribunal also dismissed the assessee's plea for cross-examination of AD, as the onus to prove the ATS's validity was on the assessee, who failed to meet this burden.The Tribunal concluded that the assessee did not satisfy the conditions for claiming deduction under section 54. The claim was found to be unproved, if not disproved, and the disallowance was upheld.Conclusion:The Tribunal dismissed the assessee's appeal, upholding both the legality of the assessment reopening and the disallowance of the deduction under section 54. The order was pronounced in the open court on March 20, 2019.